Market Update

Market Update

Stocks on Wall Street were mixed at midday amid news of a number of completed, contemplated and rejected merger and acquisition deals, highlighted by a potential blockbuster in the pharmaceutical industry. The averages opened higher though have turned mixed by midday, with the Dow leading and the Nasdaq lagging. Shares of Bank of America (BAC) have weighed on the banking sector after the company suspended its capital plans in order to boost its regulatory capital amounts and ratios after finding errors in the data the bank had previously submitted to the Federal Reserve.

ECONOMIC EVENTS: In the U.S., the National Association of Realtors’ pending home sales index rose 3.4% to 97.4 in March, topping expectations for a more modest 1.0% advance from the prior month. Also, the U.S. and Europe imposed more sanctions against Russia over its alleged intervention in Ukraine.

COMPANY NEWS: Shares of U.K.-based drugmaker AstraZeneca (AZN) surged 13% after Pfizer (PFE) confirmed it proposed to buy its peer for nearly $100B in cash and stock. AstraZeneca revealed that its board concluded that the proposal "very significantly" undervalued the company and Pfizer said it is currently considering its next steps, but would still like to pursue some kind of mutually beneficial deal. Analysts at Jefferies said they expect Pfizer to up its bid for AstraZeneca and believe Astra will see "significant additional pressure" to engage in merger talks now that Pfizer has come public. The firm views Bristol-Myers (BMY) as another takeover option for Pfizer, but notes such a deal does not offer the tax incentives that AstraZeneca provides… Charter (CHTR) rose almost 6% after striking a deal to acquire approximately 1.4M existing Time Warner Cable (TWC) subscribers after that company completes its previously announced merger with Comcast (CMCSA). In addition, Charter will form a new holding company that will own 100% of Charter and acquire an approximate 33% stake in a new publicly-traded cable provider to be spun-off by Comcast serving approximately 2.5M customers… After General Electric (GE) made an offer to purchase the energy assets of France’s Alstom (ALSMY), German industrial conglomerate Siemens (SI) confirmed it will convene "as soon as possible" after have the opportunity to meet with France’s president and other high-ranking French political leaders to decide how to proceed with a competing offer… Shares of Bank of America fell more than 5% after the bank lowered its previously disclosed regulatory capital amounts and ratios due to a newly discovered accounting error, after which the Federal Reserve Board directed the company to resubmit its requested capital actions. At the Fed?s request, the company has suspended its previously announced 2014 capital actions, including the $4.0B common stock repurchase authorization and the planned increase in the quarterly common stock dividend to 5c per share from 1c.

MAJOR MOVERS: Among the notable gainers were two other companies that did agree to be acquired. Susser Holdings (SUSS) rose 36% after reaching a deal to be bought by Energy Transfer Partners (ETP) in a unit and cash transaction valued at a total consideration of approximately $1.8B, while Furiex Pharmaceuticals (FURX) jumped 30% after agreeing to be purchased by Forest Laboratories (FRX) for $95 per share and up to $30 per share in a contingent value right based on the success of a particular drug candidate. Among the noteworthy losers was Athersys (ATHX), which plunged 56% after its MultiStem therapy failed to show meaningful benefit in a phase 2 clinical study. Also lower following its own disappointing news from a drug trial was OncoGenex Pharmaceuticals (OGXI), which fell 55% after top-line results indicated its therapy did not result in a statistically significant improvement in overall survival in men with a certain type of prostate cancer.

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Mario Randholm Blog. Mario is the founder of Randholm & Co. S.A.C., an investment management company dedicated to producing superior returns for its clients and employees by adhering to mathematical and statistical methods.